Salary or Dividend – Which is Best?

Assuming your company is paying Corporation Tax at the small company rate of 20% (profits up to £300,000), it is generally more tax-efficient to distribute profits by way of dividends to shareholders.

Overview:

• National Insurance is not payable on dividends.
• As a higher-rate tax payer, your employment income is taxed at 40%, whereas dividends are taxed at 32.5%.
• Employment earnings above £150,000 are taxed at 50% whereas dividends are taxed at 42.5%.
• Salaries attract both Employers and Employees National Insurance which can be expensive.
• For owner managed businesses the ideal pay structure will be minimal salary and dividends.
• If income can be split with a spouse greater tax savings can be achieved.

Talk to us TODAY for help with this matter: Barrie0115 721 0900 or  barrie@smithemmerson.co.uk